However, the pace at which most of the companies in the eCommerce space have been able to raise money has often sparked off a debate regarding the viability of the business models of these companies.
A recent report by UBS titled "Is India in an eCommerce bubble?" suggests that investor concerns about eCommerce being a bubble in India seem to be misplaced and suggests stocks listed in India and abroad that it thinks will be key beneficiaries of this growth.
"Our analysis of the supply-chain for offline retail by category implies adequate margins for etail in future. Inherent operating leverage in the business model and 700bp (as a percentage of gross merchandise value) lower discounting should lead to operating profit for the industry by 2020E. Grocery is a much bigger part of retail in India than in other markets. Success in this segment would imply upside to our valuation estimates," it says.
India-listed stocks
According to UBS, outside of private equity investment or listed global companies, equity investors can gain exposure to this space through online classifieds and travel; and among the India-listed stocks, maintain a 'buy' rating for Nasdaq-listed Makemytrip, Info Edge and a ?sell? rating for Just Dial.
Among telecom companies, it maintains a buy rating on Bharti Airtel and Idea Cellular. "Hindustan Unilever (HUL), Colgate, and Titan should benefit from the expanding reach of their premium products. Page Industries and TTK Prestige are vulnerable, in our view. Logistics companies are direct beneficiaries of etail growth. We believe logistics companies with pan-India coverage and robust last-mile delivery will benefit most," it suggests.
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Foreign-listed plays
Here are the stocks that UBS thinks will be likely beneficiaries of the eCommerce boom in India:
Google (Buy; Target price: US$670): Google is a key source for diverting traffic to eCommerce sites in India. We believe Google to capture significant marketing budget of eCommerce/internet companies as they progress to capture the market share. We expect Google to make most dents in the Indian market through its Android One program.
Facebook (Buy; Target price: US$92): Facebook is the second-most visited website in India. We believe Facebook can play an active role in eCommerce space with emergence of e-shops and through the sale of ad space. We expect retailers to increasingly invest in Facebook advertising to drive traffic to their own sites, particularly as more sophisticated advertising tools are adopted.
eBay (Buy; Target price: US$62): eBay management has been clear about its intentions for growth in BRIC and EM in general and plans to increase sales in these geographies by 4x. In our view, eBay is capable of making significant investments to achieve these BRIC market goals, both organically and inorganically. eBay also has exposure to the Indian eCommerce market through its investment in Snapdeal, which provides eBay with access to SnapDeal's active user base and technology (software, distribution capabilities).
Twitter (Buy, Target price: $58): Twitter's acquisition of Zipdial (mobile marketing firm unique to emerging markets) to make Twitter content more accessible in markets such as India and over time, increase the number of marketing opportunities for Twitter?s advertising customers. We expect it to gain with the emergence of target advertising.
Amazon (Neutral, Target price: $355): Amazon is one of the significant etailers in India and operates through market-place model.While India's current contribution to Amazon's total revenue is low, we expect substantial gains from Indian eCommerce and expect the company to remain a top two or three player in future. Amazon is the largest foreign and listed company in Indian etail and has an added advantage of its multiple geographical experience, global best practice and technology accessibility.
Nasper (Buy, Target price: South African Rand 2,130): Nasper has investments in Flipkart (general retail), Ibibo (online travel), OLX (classifieds), PayU (payments) and Redbus (online bus booking). Most of the companies it has invested in are leaders in their respective verticals, and as such we think Naspers is well-placed to benefit from the growth in Indian eCommerce.
Rocket Internet (Neutral, Target price: euro51): Rocket Internet has a portfolio of investments in the Indian eCommerce space with a primary focus on internet retailing through Jabong (Fashion), Fab Furnish (Furniture), Food Panda (food delivery), Coupon Nation (group buying/deals), Print Avenue (order printing) and Office Yes (stationary). We believe Rocket Internet will be a key beneficiary of acceptance of online retailing (etailing) in India.